I call to order this 33rd meeting of the Standing Committee on Finance.

I want to welcome all of our guests here this afternoon as we're continuing our pre-budget consultations. We have five organizations here. For the first panel, we have Canada's Venture Capital and Private Equity Association, the Association of Consulting Engineering Companies, the Aerospace Industries Association of Canada, the Canadian Association of Fire Chiefs, and the Canadian Electricity Association.

Colleagues, we have votes at 6 p.m., and we have five motions and two full panels, so it will be a very busy afternoon for us.

Each organization will have five minutes for an opening statement. We'll start with Canada's Venture Capital and Private Equity Association.

My name is Mark McQueen. I'm a board member of the CVCA and I run a venture capital fund in Toronto called Wellington Financial.

The CVCA was founded in 1974 with 130 member organizations with 1,800 individual participants. In 2008 there were 1,755 VC-backed companies employing 150,000 people, with sales of $18 billion a year in this country.

VC funds focus on many sectors, primarily through active management in emerging technologies such as information technology, life sciences, clean tech, alternative energy, and biotech. Our portfolio companies grow five times faster than non-VC-backed firms and, on average, export 70% of their sales.

In the U.S., venture capital has played a role in Microsoft, Google, and Intel. In Canada, VC has had an early role in Research In Motion, Corel, Day4 Energy, Biox, and Miranda.

Vancouver’s Vision Critical is a good recent example. With $11 million of private capital, Vision Critical in Vancouver has grown from 30 employees in October 2006 to 350 today and is going to 450 by Christmas. Revenue is up by 20 times.

PE funds are also active capital providers to the high-growth, mid-sized firms in our country, with very meaningful employment numbers. Porter Airlines, which is a story of merchant banking and private equity backing, is a good case study. In five years it has created 1,000 jobs, acquired half a billion dollars' worth of Toronto-made Bombardier aircraft, and has preserved 4,500 jobs at a manufacturing plant during a very difficult recession.

Canada's VC investment is, however, at a 14-year low. Our nation's R and D investment of $18 billion a year is being stranded because there is not enough capital to commercialize the investments being made by governments, both federal and provincial. The United States spends twice as much per capita to commercialize their R and D as we do. The U.S. venture capital industry put $18 billion U.S. into their economy last year, versus $1 billion in Canada, well below our GDP ratio or our population ratio. With their deeper pockets, U.S. VCs invest twice as much per portfolio as we do in Canada.

The ability of our funds to raise new money and put that money to work in the economy diminishes by the day. Without new capital to invest, the next five years will be even bleaker, and a 14-year trend will become a 19-year trend. Last year, VCs financed 330 companies, down 38% from 536 in 2005. That's a lot fewer jobs, a lot fewer start-ups, and a lot fewer chances to recreate Research in Motion's success.

We have five ideas that we've tabled with the government to correct this imbalance. They tackle the angel stage, the commercialization stage, as well as the venture capital stage. Many of these ideas are costless and should attract attention in this environment.

The first is to improve the IRB offset program to allow investments by foreign companies in venture capital firms to count as their offset credit.

Second is to do what many provinces have done through their budget processes: to enhance the retail investor capacity to put money into the asset class through an enhanced labour-sponsored tax credit.

The third, which is our primary suggestion here today, is to do what provinces have done in many parts of the country and establish a $300 million private sector-managed VC fund of funds program, which should actually be a profitable undertaking over time.

The fourth is to permit corporations to treat their investments in VC funds in the same manner that they treat internal R and D expenditures, namely, as a business expense. For some reason, money spent internally is tax deductible, but money invested externally is not.

Last is to recognize the fantastic success of the SR and ED program, but to enhance it, where $1 of each qualifying expense would receive a credit of $1.50, versus the 80¢ or 90¢ credit that might happen today. This is a well-understood program that the government and successive governments have promoted, and entrepreneurs know how to access it, engineers know how to utilize it, and VCs know how to leverage it. It requires no change to your current systems and it would be a modest cost to the public purse.

In the package you've received there are statistics going back to 1996 showing the venture capital decline. If you look back at 1996, there are about as many dollars going into the economy as there are today, so 14 years have passed, our economy has more than doubled in that time, if not tripled, and the VC dollars are flat.

That explains the problem in black and white and why we're here today to seek your help to address it.

I'm John Gamble, president of the Association of Consulting Engineering Companies. I'm accompanied by our vice-president of policy and public affairs, Susie Grynol. We're pleased to have this opportunity to appear before you.

We are a business association representing approximately 500 consulting engineering companies across Canada that provide professional services to both public and private sector clients. Today we'll be providing key highlights from our written submission provided earlier.

Public infrastructure, to our mind, is a core business of government and is vital to our economic, social, and environmental quality of life in Canada. Therefore, we applaud the significant infrastructure commitments from successive governments, including the more recent $12 billion infrastructure stimulus fund and the ongoing $33 billion Building Canada plan.

While these programs have made significant progress in renewing Canada's infrastructure, they have been insufficient to overcome the infrastructure investment shortfall accumulated over many decades. Recent reports and studies observe a decline in infrastructure investment from nearly 6% of GDP in 1960 to approximately 3% in 2004.

It's our view that we must return to a long-term strategic infrastructure investment plan in order for Canada to properly address its infrastructure investment gap and preserve our competitiveness. In order to do this, we are offering three recommendations, which will now be outlined by Ms. Grynol.

ACEC recommends that the government develop and commit to a long-term investment strategy.

ACEC is cognizant of the spending and tax constraints currently facing the federal government. With last year's $50 billion deficit and with further deficit details forecast until 2015, the federal government will be limited in terms of its spending ability. It is for this reason that ACEC believes that a long-term investment strategy is essential.

ACEC recommends the following key features be included in a long-term investment strategy: first is a commitment to close and stabilize the infrastructure deficit over the long term; second is an ongoing assessment of infrastructure investment needs, including the state of current infrastructure, changing needs of society, and population growth; third is the prioritization and sequencing plan for projects and programs; fourth is realistic timelines that balance the long-term urgency of infrastructure investment with current fiscal pressures; fifth is clearly defined roles and expectations for all three levels of government involved; and sixth is the institution of an annual evaluation of progress.

A strategy that sets a clear path toward bridging the infrastructure deficit gap will provide clarity and certainty to both public and private sector organizations that participate in the planning, implementation, operation, and maintenance of public infrastructure.

Our second recommendation to the Government of Canada is to maintain the existing pre-stimulus infrastructure programs until a long-term strategy is in place.

Based on remarks earlier this week by Minister Stockwell Day to the Canadian Public Procurement Council, we understand this is the intent of the government. This is supported and applauded by ACEC.

Until such time that a long-term strategy is in place, it is important that Canada does not lose ground on infrastructure deficit. Continuation of pre-stimulus programs will allow both the government and the private sector to remain well-resourced as they implement infrastructure projects. With the exception of the gas tax fund, the majority of infrastructure investment programs from the federal government, such as the stimulus fund and the ongoing Building Canada plan, are scheduled to end in 2011 and 2014 respectively. We're happy to hear the government plans to maintain these programs, while realizing they will shortly be coming to a close.

Our third recommendation to the Government of Canada is to provide flexibility on the stimulus funding deadline on projects for which funding has already been approved but for which legitimate delays were experienced during implementation.

For these reasons, we support the pragmatic approach suggested by Minister Flaherty.

We'd simply like to conclude by re-emphasizing that it's our view that public infrastructure is a core business of government. That's not to say there can't be private sector involvement.

Infrastructure must be considered an investment, not an expense. Embracing a long-term strategic infrastructure investment plan to address our infrastructure shortfall will make Canada more competitive and, just as important, more resistant to economic downturns. It will enhance our social, economic, and environmental quality of life. It will help us reduce the capital, upkeep, and operational cost of infrastructure over its design life and create long-term jobs in multiple sectors.

However, as we mentioned, commitment to long-term funding strategies by all three levels of government has significantly waned since the sixties, and infrastructure investment has decreased by half.

The Canadian aerospace industry is no less than fifth in the world. In 2009 it produced $22 billion in revenue, 80% of which was generated through exports. Since 2009, it has employed 79,000 Canadians, 46% of them in Quebec, 28% in Ontario, 17% in western Canada, and 10% in Atlantic Canada. It's an industry that is spread over the country.

Aerospace is a poster child for the new knowledge-based economy. The key message I want to give to you today is that we need to make sure our growth continues.

Our companies are undisputed leaders in sectors like regional aircraft, business aircraft, helicopters, small turbine engines, flight and training simulators, satellites, robotics, fleet maintenance, landing gear, avionics and composite materials, to name but a few.

Our expertise in aerospace is the envy of many larger nations, and we are proud of it.

In order to remain competitive, and because we believe in the importance of reducing our environmental footprint, we are working at the greening of our industry through the green aviation R and D network, GARDN, a business-led centres of excellence program with a budget of approximately $23 million, $12 million of that coming from the federal government.

Many of you have heard the industry position on the government's decision to acquire 65 F-35 aircraft. Indeed, we are determined to optimize the benefits that our industry and Canadians will get from participating in Lockheed Martin's global supply chain being developed over the next 24 months.

It is very important to note that the expertise and knowledge we gain through our participation in this military program will be applicable to the great civilian platforms of the future.

But GARDN, and even an optimized participation in the F-35, will not guarantee our long-term competitiveness in the globally competitive environment. The forecast demand is estimated to reach $3.2 trillion over the next 20 years for 30,000 aircraft.

This demand represents extraordinary growth potential for our industry, as long as we work together to forge a strong partnership between industry, governments, the public, the education sector and workers' representatives.

In order to the reap the benefits of the growing demand, we have to be ready to present new technologies to be integrated in the future major platforms that will operate in the coming decades.

Our key point today is that our member companies are currently working on three technology demonstrator projects: low-cost composite manufacturing of structures; electric engines and noise reduction of turbofan engines; and advanced engine systems. These are collaborative efforts. To continue competing to access this growing demand, we need government support on this, and I'll come back to that in a minute.

Space is an extremely important part of the industry. We all know about the Canadarm, but many of you also know that RADARSAT-2 plays a role in monitoring environmental indicators, in ensuring our sovereignty in the Arctic, and in precision agriculture, to name a few.

There is no doubt that there is an imminent need to develop and support a comprehensive aerospace strategy, a clear vision of Canada's ambitions regarding aerospace, including a well-funded space plan, in partnership with the stakeholders.

Our immediate demands to you today consist of the funding for what I've mentioned: the technology demonstrator projects, which require $40 million per project for a total of $120 million.

In conclusion, given the global growth in demand for aircraft over the next 20 years, our opportunity is nothing less than to double the size of this sector to create jobs for all Canadians. The risk of not playing hard is losing ground rapidly.

Thank you, Mr. Chair, and good afternoon. My name is Rob Simonds and I'm the fire chief in Saint John, New Brunswick, and the president of the Canadian Association of Fire Chiefs. I'm here to speak about a serious public safety issue in Canada.

The Government of Canada can play a vital role in solving the growing problem of recruiting and retaining volunteer firefighters through the introduction of a $3,000 income tax credit for volunteer firefighters who have performed more than 200 hours of service each year. By way of background, the Canadian Association of Fire Chiefs is a non-partisan national association that was formed in 1908. Our 1,000 members include fire chiefs and other chief fire officers from every Canadian province and territory and include fire chiefs from Canada's first nations, industry, airports, seaports, major health care facilities, and Canadian Forces establishments. Our national board of directors includes the president of each provincial and territorial association of fire chiefs.

The CAFC is in the best position to speak on behalf of all elements of the Canadian fire service. I would offer, Mr. Chair, that volunteer firefighters are unique, even amongst other volunteer emergency first responders. Many Canadians, including members of Parliament, are shocked to learn that the vast majority of Canadian communities are protected by volunteer firefighters. Of Canada's 3,492 fire departments, more than 91% are volunteer departments, and four out of every five firefighters are volunteers. In many of Canada's rural and remote communities, volunteer firefighters are the only emergency service first responders. In no other emergency responder service do volunteers play such a significant role.

While they are volunteers in name, their training and the services they provide are highly professional. Unlike other volunteer emergency responders, they are trained in the same way as are career firefighters. Once volunteers are recruited, for them to be properly trained takes approximately three years, and sadly, many of them do not stay past five years. The lack of reimbursement for out-of-pocket expenses, inadequate equipment and resources, and the time spent away from families and paid employment make it difficult to attract new volunteer firefighters and to keep those already trained.

Other emergency service providers choose when they want to volunteer, whereas volunteer firefighters are often on call all the time. These brave men and women leave their full-time jobs to attend emergencies, losing wages and incurring personal cost in the process.

So how much will this tax credit cost Canadian taxpayers? The CAFC is currently conducting a survey of Canadian fire departments to determine how many volunteers would qualify for this proposal in order to provide the Minister of Finance with accurate costing. However, if we assume that 75% of Canada's volunteer firefighters would qualify, this tax credit would cost the Government of Canada less than $29 million a year. To put this in perspective, it would cost $3.8 billion to replace Canada's volunteer firefighters with paid, full-time firefighters at $45,000 a year. To pay existing volunteers for their current hours of voluntary service at a rate of $23 per hour would cost more than $860 million a year. These are very conservative estimates that provide a cost-benefit perspective for this committee.

What compensation do volunteer firefighters currently receive? There are some misconceptions that volunteer firefighters are sufficiently compensated for their volunteer service. It is true that in limited cases in some provinces volunteer firefighters receive an hourly stipend for responding to emergencies. This is rare. Most volunteer fire departments do not offer hourly stipends. For those that do, stipends usually cover only the specific time a volunteer spends responding to calls, which on average amounts to less than 30% of a volunteer's time commitment.

Currently, up to $1,000 of any stipend provided to a volunteer firefighter does not have to be declared as personal income. Unfortunately, this tax credit is of limited value because only 20% of volunteer fire departments have the fiscal capacity to provide honorariums. The 74% that do provide less than $1,000. That is why Canada's fire chiefs have proposed that the current $1,000 tax credit be replaced by a $3,000 non-refundable tax credit that can be applied to any income.

We strongly believe that our tax relief proposal is urgently needed and would help ensure that rural Canadians would receive the same level of fire service as those who live in urban Canada. The CAFC recently launched a website in support of our proposed tax credit. The website, www.givefirefighterscredit.ca, includes a petition that members of the public can sign in support of their volunteers. In just two weeks, the petition has received more than 2,000 signatures.

Mr. Chairman, in summary, I would offer that the Canadian Association of Fire Chiefs is committed to working with the Government of Canada. We feel that as stewards of public safety it's our responsibility to alert the Government of Canada when there are issues that would impinge upon public safety, and we are concerned that we could fall into crisis with respect to having insufficient resources across this country. We are committed to working with government and pleased to be before this committee today.

Founded in 1891, the Canadian Electricity Association is the voice of Canadian electricity. Every day, CEA members generate, transmit, and distribute electrical energy to industrial, commercial, residential, and institutional customers across Canada. From vertically integrated electric utilities to power marketers, to the manufacturers and suppliers of materials, technology, and services that keep the industry running smoothly, our members ensure that Canadians have safe, reliable, and sustainable electricity service. And Canadians have a high level of confidence that Canada's electricity system will continue to provide electricity when they need it. They are proud of the fact that over 75% of Canada's electricity is generated from non- or low-emitting sources. By comparison, approximately 30% of electricity in the United States is generated from non- or low-emitting sources.

The electricity system is the backbone of our economy. CEA members provide Canadians with some of the most competitively priced electricity in the world. While recently there's been much parliamentary debate about Canada's corporate tax rates, often missing in that discussion is the tremendous competitive advantage that safe, reliable, low-cost electricity continues to provide to Canadian business.

Ensuring that the Canadian economy remains competitive and that Canadians will continue to enjoy a superior quality of life—one that includes a clean environment—requires action by the federal government on electricity sector challenges. The federal government has made an international commitment that Canada will reduce its GHG emissions by 17% from 2005 levels by 2020 and a national objective of generating 90% of its electricity from non- or low-emitting sources by the same year. Achieving these targets and continuing to meet increasing demand for electricity, while simultaneously replacing aging infrastructure, is no small task.

CEA's pre-budget submission proposes three high-level recommendations that, if implemented, will help achieve these goals. The first, amending the renewable energy classes in the Income Tax Act to improve capital cost allowance rates, would facilitate capital upgrades for existing and new transmission infrastructure, which would enable more intermittent renewable energy sources such as wind, solar, hydro, biomass, tidal, and other emerging renewables to flow into the grid.

Our second recommendation relates to energy storage technologies. With the exception of large hydro, most sources of bulk electricity cannot justify the added costs of developing and implementing utility-scale storage technologies to save surplus energy production to fulfill peak periods of demand. In addition to saving otherwise lost power, energy storage technology can provide a cost-effective solution to the widespread integration of the intermittent renewable energy technologies I mentioned a moment ago, such as wind, solar, and tidal.

There are numerous emerging energy storage technologies that have the potential to form a large part of the electricity grid of the future, from the generating station all the way down to the potential for customers to plug in an electric vehicle. CEA proposes the establishment of an energy storage grant program to fund electric utility energy storage pilot projects to assist in bringing these technologies into the mainstream.

Our third recommendation addresses the need for regulatory reform at the federal level, a necessary precursor to building tomorrow's electricity system and enabling more effective operations today. Electricity infrastructure projects and existing facilities are subject to multiple pieces of legislation and regulation falling under the jurisdictions of various agencies and orders of government, each of which may have a different mandate and jurisdictional obligation. At the federal level, these include the Canadian Environmental Assessment Act, the Canadian Environmental Protection Act, the Fisheries Act, the Migratory Birds Convention Act, the Navigable Waters Protection Act, the Nuclear Safety and Control Act, and the Species at Risk Act. This regulatory structure has resulted in unnecessary complexity, increased uncertain or absent timelines for project approvals, and a lack of process clarity for all stakeholders, including project proponents, regulators, and the public. Regulations often overlap and conflict, and there's a lack of a strategic framework or vision for how these regulations should work together to meet Canada's environmental, economic, and social objectives.

Let me be clear. CEA members do not seek the watering down of these acts to evade compliance. They seek regulatory predictability, consistency of application, and, in every instance, positive environmental outcomes. We would welcome the inclusion of changes to the aforementioned acts in budget legislation and would be very pleased to share more detailed recommendations at your request.

On behalf of CEA members, thank you for the opportunity to share our association's view on how electricity can continue to play a central role in an environmentally sustainable, competitive, and prosperous Canadian future.

When I look at countries around the world with regard to the relative strength of their venture capital industries, some countries really stand out. Israel is one of them.

I agree with your proposals here to strengthen venture capital in Canada because I'm concerned with the dearth of venture capital today; we're going to have a dearth of discoveries in jobs of tomorrow in 10 or 15 years. A lot of this speaks to the aerospace industry as well, I think.

What are countries like Israel doing differently to create such a strong venture capital industry, particularly in the area of green technology? We're a high carbon economy. We consume and produce a lot of energy that is not clean. We have an opportunity to produce cleaner energy and to become more energy efficient. It takes technology. What is Israel doing, and what could we be doing better to be a leader in the emerging clean technology space?

Thanks, Mr. Brison, and for your ongoing interest in our sector for now many years.

We released a study in May that looked at 14 different nations around the world. One of them was Israel. The first and foremost thing was that the government of the day got industry to get together with business and elected officials and they said, “This is important. What can we do?” They didn't only put it on the universities. They didn't simply leave it on the doorsteps of public officials, but brought business into the ecosystem.

One of our five ideas would do that. If Encana is going to do research internally, it's tax deductible. Why can't Encana put money into a venture capital fund and have that be tax deductible too? It's a disincentive to create new innovations outside their own company to the betterment of everybody, not only their own shareholders.

Israel, because of its small economy, is seen to be able to attract silicone valley venture capital firms to base there, and that has been done in part by leading with limited partnership commitments, but primarily by making it a focus. It's that simple. If it's not a focus of the government of the day, it's not going to be successful.

We're happy to send around this document that we prepared two months ago, if the committee so desires. It is on our website already, for those who are interested.

Israel is a very interesting case. They've made a lot of small and large decisions to enhance the development of their high-tech and their venture capital space. On the small side, they've taken one of their most leading entrepreneurs—I think one of the co-founders of RIM—and plunked him into the Department of Finance and told him his mandate is to come out with the next generation of programs for Israel to keep at the forefront of the world industry.

Second, in terms of large, they came up with a very innovative program called the Yozma program, about seven to nine years ago. They realize it has come to its natural conclusion, and they are working on Yozma II right now. There are some interesting indicators that we can discuss with you offline on that score.

They've even taken their government procurement, not only at the national level but at the cities level, and are using it to buy and promote next-generation technologies. And Shai Agassi, with the electric car work he is doing there, has really made Israel a game-changer in that space. Again, that speaks to the important role of procurement in terms of the aerospace industry and creating national champions. Other countries are doing it. We're probably not doing enough of that, and haven't done so for a long time.

I want to speak to the volunteer firefighters issue, because what a lot of people don't realize, and what Mr. Simonds brought to this committee, is that in rural and small town Canada, the volunteer fire protection and also the medical first response in communities like Cheverie, where I live, is provided by volunteers. They are paying for their equipment, in a lot of cases, either by fundraising or, in many cases, paying for it out of their own pockets. They are paying for training, spending their time and money out of their own pockets to do it, and they're providing an incredibly important essential service and risking their lives for the privilege of doing so.

We're very supportive, and our party is very supportive, of your initiative in terms of the $3,000 tax credit.

There's one thing I want to ask you. It's 200 hours to qualify for the $3,000 tax credit. For some in smaller communities, their sacrifice is significant, but it may be 100 hours because of the nature of the calls. Should we be looking at a smaller tax credit to perhaps reflect 100 hours to make it more broadly available and equitable?

Mr. Chair, I'd offer that the notion has absolutely been discussed. A variety of considerations have been discussed with the fire chiefs across Canada. What we have indicated to government is that we are committed to working with them to find the most optimum solutions so as to recognize the invaluable contributions of those volunteer firefighters.

As Mr. Brison suggested, if the thresholds need to be changed, we can certainly revisit that. However, at this juncture, the feedback we have received from the fire chiefs across Canada is that the 200-hour threshold would be a meaningful and appropriate one.

However, going back to our previous discussions with the senior officials from the finance department, we are committed to working with them to find an optimal solution that may very well address the concerns that have been expressed here.

I mentioned procurement earlier and its importance to venture capital, potentially, and to new technologies and their early adoption. In terms of aerospace, we're getting feedback from companies like IMP in Halifax on the importance of in-service support and that the changes to the policy on in-service support have been detrimental to the Canadian aerospace industry. So I'd appreciate your industry's feedback on that and how important it is in procurement that we have long-term, in-service support contracts for Canadian aerospace.

That's a very important issue for our members. There are thousands of jobs at stake across the country, and we believe we are in the best possible position to keep those jobs, to increase those jobs, and I certainly hope the policies will be developed to allow that.